Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 12, 2014 | |
Document and Entity Information: | ' | ' |
Entity Registrant Name | 'NATIONAL TAX CREDIT INVESTORS II | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0000859921 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 72,017 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Balance_Sheets_September_30_20
Balance Sheets (September 30, 2014 Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Cash and cash equivalents | $3,114 | $3,577 |
Mortgage note receivable | 3,478 | 3,478 |
Accounts receivable - limited partners | 181 | 181 |
Other assets | 54 | 54 |
Total assets | 6,827 | 7,290 |
Liabilities: | ' | ' |
Accounts payable and accrued expenses | 28 | 32 |
Partners' (deficiency) capital: | ' | ' |
General partner | -561 | -556 |
Limited partners | 7,360 | 7,814 |
Total partners' (deficiency) capital | 6,799 | 7,258 |
Total liabilities and partners' (deficiency) capital | $6,827 | $7,290 |
Statements_of_Operations_Septe
Statements of Operations (September 30, 2014 Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Operating Expenses: | ' | ' | ' | ' |
Management fees - general partner | $16 | $27 | $47 | $80 |
General and administrative | 17 | 16 | 58 | 42 |
Legal and accounting | 12 | 16 | 48 | 64 |
Total operating expenses | 45 | 59 | 153 | 186 |
Loss from partnership operations | -45 | -59 | -153 | -186 |
Advance recognized as expense | -112 | -325 | -306 | -1,005 |
Equity in income (loss) of Local Partnerships and amortization of acquisition costs | ' | ' | 0 | -55 |
Net Income (Loss) | -157 | -384 | -459 | -1,246 |
Net Income (Loss) allocated to general partner (1%) | -2 | -4 | -5 | -12 |
Net Income (Loss) allocated to limited partners (99%) | ($155) | ($380) | ($454) | ($1,234) |
Net Income (Loss) per limited partnership interest | ($2.15) | ($5.28) | ($6.30) | ($17.12) |
Statement_of_Changes_in_Partne
Statement of Changes in Partners' (Deficiency) Capital (Unaudited) (USD $) | General Partner | Limited Partners | Total |
In Thousands | |||
Partners' (deficiency) capital, beginning balance at Dec. 31, 2013 | ($556) | $7,814 | $7,258 |
Net Income (Loss) | -5 | -454 | -459 |
Partners' (deficiency) capital, ending balance at Sep. 30, 2014 | ($561) | $7,360 | $6,799 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net Income (Loss) | ($459) | ($1,246) |
Adjustments to reconcile Net Income (Loss) to net cash used in operating activities: | ' | ' |
Equity in (income) loss of Local Partnerships and amortization of acquisition costs | 0 | 55 |
Change in accounts: | ' | ' |
Change in Accounts Receivable | 306 | 1,005 |
Change in Accounts payable and accrued expenses | -4 | -20 |
Net cash used in operating activities | -157 | -206 |
Cash flows provided by (used in) investing activities: | ' | ' |
Advances to Local Partnership | -306 | -1,005 |
Net cash flows provided by (used in) investing activities | -306 | -1,005 |
Net decrease in cash and cash equivalents | -463 | -1,211 |
Cash and cash equivalents, beginning of period | 3,577 | 5,163 |
Cash and cash equivalents, end of period | $3,114 | $3,952 |
Note_1_Organization_and_Summar
Note 1 - Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 1 - Organization and Summary of Significant Accounting Policies | ' |
Note 1 - Organization And Summary Of Significant Accounting Policies | |
General | |
The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2013 filed by National Tax Credit Investors II (the “Partnership” or “NTCI-II”). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. | |
In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. | |
Organization | |
NTCI-II is a limited partnership formed under the California Revised Local Partnership Act as of January 12, 1990. The Partnership was formed to invest primarily in other limited partnerships (“Local Partnerships”) which own and operate multifamily housing complexes that are eligible for low income housing federal income tax credits (the “Housing Tax Credit”). The general partner of the Partnership is National Partnership Investments, LLC (the “General Partner” or “NAPICO”), a California limited liability company. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). The business of NTCI–II is conducted primarily by NAPICO. The Partnership shall continue in full force and effect until December 31, 2030, unless terminated earlier pursuant to the Partnership Agreement or law. | |
The General Partner has a one percent interest in the operating profits and losses of the Partnership. The limited partners will be allocated the remaining 99 percent interest in proportion to their respective investments. | |
Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the General Partner will be entitled to a property disposition fee as mentioned in the partnership agreement. The limited partners will have a priority item equal to their invested capital plus 6 percent priority return as defined in the partnership agreement. This property disposition fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions plus the 6 percent priority return. Disposition fees have not been paid or accrued. | |
At September 30, 2014 and December 31, 2013, the Partnership had outstanding 72,017 limited partnership interests. | |
Basis of Presentation | |
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States. | |
Method of Accounting for Investment in Local Partnerships | |
The investments in Local Partnerships are accounted for on the equity method. Acquisition fees, selection fees and other costs related to the acquisition of the projects have been capitalized as part of the investment account and are being amortized by the straight line method over the estimated lives of the underlying assets, which is generally 30 years. | |
Mortgage Note Receivable | |
The Partnership reviews its mortgage note receivable whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. During the quarter ended March 31, 2013 it was determined there was an impairment of $55,000 which reduced the mortgage note receivable to $3,478,000. This amount was recorded as Equity in losses of Local Limited Partnerships. The Partnership has recorded its mortgage note receivable at the impaired balance of $3,478,000 at September 30, 2014 and December 31, 2013. No further impairments were recognized during the nine months ended September 30, 2014 or 2013. See “Note 3 – Mortgage Note Receivable” for further information. | |
Impairment of Long-Lived Assets | |
The Partnership reviews long-lived assets to determine if there has been any impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. An impairment loss was not recognized during the nine months ended September 30, 2014 and 2013. | |
Net Income (Loss) Per Limited Partnership Interest | |
Net income (loss) per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 72,017 and 72,032 for the three and nine months ended September 30, 2014 and 2013, respectively. | |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At September 30, 2014 and December 31, 2013, the Partnership held variable interests in two VIEs for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partners conduct and manage the business of the Local Partnerships; | |
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties; | |
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships; | |
· the general partners are obligated to fund any recourse obligations of the Local Partnerships; | |
· the general partners are authorized to borrow funds on behalf of the Local Partnerships; and | |
· the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance. | |
The two VIEs at September 30, 2014 consist of Local Partnerships that are directly engaged in the ownership and management of two apartment properties with a total of 355 units. The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which was approximately $3,478,000 at September 30, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. | |
Revenue Recognition – Deposit Method | |
Profit on the sale of limited partnership interests shall not be recognized under the full accrual method until all of the following criteria are met: a sale is consummated, the buyer’s initial and continuing investments are adequate, the seller’s receivable is not subject to future subordination and the risks of ownership have transferred to the buyer. The Partnership recognizes gains on sale of limited partnership interests using the deposit method when all of the criteria for the full accrual method are not met. Under the deposit method no gain is recognized, no receivable from the buyer is recorded at the closing date and any cash received from the buyer is reported as a deposit liability on the balance sheet. As a result, the Partnership continues to carry the investment on its financial statements. |
Note_2_Investments_in_and_Adva
Note 2 - Investments in and Advances To Local Partnerships | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Notes | ' | |||||||
Note 2 - Investments in and Advances To Local Partnerships | ' | |||||||
Note 2 - Investments In and Advances to Local Partnerships | ||||||||
As of September 30, 2014 and December 31, 2013, the Partnership held limited partnership interests in two Local Partnerships, located in two states. As a limited partner of the Local Partnerships, the Partnership does not have authority over day-to-day management of the Local Partnerships or their properties (the "Apartment Complexes"). The general partners responsible for management of the Local Partnerships (the "Local Operating General Partners") are not affiliated with the General Partner of the Partnership, except as discussed below. | ||||||||
At September 30, 2014 and December 31, 2013, the Local Partnerships owned residential projects consisting of 355 apartment units. | ||||||||
The projects owned by the Local Partnerships in which NTCI-II has invested were developed by the Local Operating General Partners who acquired the sites and applied for applicable mortgages and subsidies, if any. NTCI-II became the principal limited partner in these Local Partnerships pursuant to arm's-length negotiations with the Local Operating General Partners. As a limited partner, NTCI-II's liability for obligations of the Local Partnerships is limited to its investment. The Local Operating General Partner of the Local Partnerships retains responsibility for developing, constructing, maintaining, operating and managing the Projects. Under certain circumstances, an affiliate of NAPICO or NTCI-II may act as the Local Operating General Partner. An affiliate, National Tax Credit Inc. II ("NTC-II") is acting either as a special limited partner or non-managing administrative general partner (the “Administrative General Partner”) of each Local Partnership in which the Partnership had an investment. | ||||||||
The Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 98.9% and 99.0%). The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership. | ||||||||
The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. See “Note 1 – Organization and Summary of Significant Accounting Policies” for a description of the impairment policy. The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. | ||||||||
Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. There were no such distributions received during the nine months ended September 30, 2014 and 2013. | ||||||||
For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize. | ||||||||
In October 2013, the Partnership assigned its limited partnership interest in Jamestown Terrace to an affiliate of the Local Operating General Partner for a total of $10,000. This amount was recognized as a gain on sales of limited partnership interest in Local Partnerships during the year ended December 31, 2013 as the Partnership had no investment balance remaining at the date of the assignment. | ||||||||
In November 2013, the Partnership assigned its limited partnership interest in Virginia Park Meadows to an affiliate of the Local Operating General Partner in exchange for the assumption and agreement to discharge all of the Partnership's obligations with respect to that Local Limited Partnership. This agreement was subject to the Partnership paying a $3,000 transfer fee to the state of Michigan. The Partnership had no investment balance remaining as of the date of the agreement. | ||||||||
During September 2013, the Partnership entered into an Assignment and Assumption Agreement to assign its limited partnership interest in Michigan Beach to a third party for a total amount of $10.00. Additionally, during September 2013, the Partnership entered into a Loan Purchase Agreement with the same third party, to sell the second mortgage held by the Partnership for an amount equal to the outstanding principal on the Loan. In April 2014, the Partnership entered into an amendment to each of the Assignment and Assumption Agreement and the Loan Purchase Agreement to, among other things, extend the closing date for the transactions to December 31, 2014. As of September 30, 2014, the outstanding principal balance on the Loan was $3,596,000. The Registrant's investment balance in Michigan Beach was reduced to zero. The assignment and the Loan purchase are expected to close during 2014 and are subject to i) the consent of the United States Department of Housing and Urban Development and ii) the consent of Midland Loan Services, Inc. If either condition is not met prior to December 31, 2014, then the Assignment Agreement and the Loan Agreement would terminate. In the event that the closing does not timely occur due to the default by Assignee of its obligations under the Assignment Agreement or the Loan Agreement, then the Registrant will be entitled to keep the $1,000 escrow deposit made by Assignee in connection with the Loan Agreement. In the event that the closing does not timely occur due to the default by the Partnership, then the rights and obligations of both parties under both agreements terminate, except for certain indemnification rights. | ||||||||
As of September 30, 2014 and December 31, 2013, the investment balance in one of the two Local Partnerships had been reduced to zero. The Partnership's remaining investment balance relates to the mortgage note receivable, which is discussed in "Note 3 - Mortgage Note Receivable". | ||||||||
At times, advances are made to Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in limited partnerships. Advances made to Local Partnerships in which the investment balance has been reduced to zero or repayment is uncertain are charged to expense. The Partnership made advances of approximately $306,000 and $1,005,000 to Michigan Beach during the nine months ended September 30, 2014 and 2013, respectively, for operations and capital expenditures at the property. While not obligated to make advances to any of the Local Partnerships, the Partnership may make future advances in order to protect its economic investment in the Local Partnerships. | ||||||||
The following are estimated unaudited condensed combined statements of operations for the three and nine months ended September 30, 2014 and 2013 for the Local Partnerships in which the Partnership has investments (in thousands). The 2013 amounts exclude Jamestown Terrace and Virginia Park Meadows for which the Partnership assigned its limited partnership interest in 2013. | ||||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Revenues: | ||||||||
Rental and other income | $ 751 | $ 736 | $ 2,222 | $ 2,123 | ||||
Expenses | ||||||||
Operating expenses | 513 | 423 | 1,541 | 1,268 | ||||
Interest | 149 | 142 | 449 | 428 | ||||
Depreciation and amortization | 136 | 132 | 409 | 395 | ||||
Total expenses | 798 | 697 | 2,399 | 2,091 | ||||
Loss from continuing operations | $ (47) | $ 39 | $ (177) | $ 32 | ||||
An affiliate of the General Partner is currently the Local Operating General Partner in one of the Partnership’s two Local Partnerships included above. |
Note_3_Mortgage_Note_Receivabl
Note 3 - Mortgage Note Receivable | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 3 - Mortgage Note Receivable | ' |
Note 3 – Mortgage Note Receivable | |
On May 30, 2006, the Partnership purchased the second mortgage for a Local Partnership, Michigan Beach, from the second mortgage holder, PAMI Midatlantic, LLC (“PAMI”) for a purchase price of $4,320,000. The second mortgage had a principal balance of approximately $3,596,000 and accrued interest outstanding at the time of the purchase. | |
PAMI had filed an action for foreclosure and the appointment of a receivor for the alleged failure to make surplus cash payments and provide required financial reporting. As a result of the purchase, the Partnership was substituted in place of PAMI in the foreclosure action and then the Partnership dismissed the foreclosure action with prejudice on June 9, 2006. The Partnership is the sole limited partner in Michigan Beach. | |
The second mortgage accrues interest at a fixed rate of 6.11%. Semiannual payments from 50% of surplus cash are required and the note matures in July of 2031. There is an option to the noteholder to accelerate maturity of the second mortgage after October of 2008. There have been no payments made on the loan. The Partnership recognized approximately $55,000 in equity in loss from Michigan Beach during the nine months ended September 30, 2013, and reduced the carrying value of the mortgage note receivable. With respect to the second mortgage from Michigan Beach, the Partnership has fully reserved any accrued interest. |
Note_4_Transactions_With_Affil
Note 4 - Transactions With Affiliated Parties | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 4 - Transactions With Affiliated Parties | ' |
Note 4 – Transactions with Affiliated Parties | |
Under the terms of its Partnership Agreement, the Partnership is obligated to the General Partner for the following fees: | |
(a) An annual Partnership management fee in an amount equal to 0.5 percent of invested assets (as defined in the Partnership Agreement) at the beginning of the year is payable to the General Partner. For the nine months ended September 30, 2014 and 2013, partnership management fees in the amount of approximately $47,000 and $80,000, respectively were recorded as an expense. | |
(b) The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was approximately $22,000 for the nine months ended September 30, 2014 and 2013 and is included in general and administrative expenses. | |
NTC-II or another affiliate of the General Partner is the Local Operating General Partner in one of the Partnership's two Local Partnerships at September 30, 2014. In addition, NTC-II is typically either a special limited partner or an administrative general partner in each Local Partnership in which the Partnership has an investment. | |
The General Partner is not obligated to advance funds to the Partnership for operations or to fund Partnership advances to Local Partnerships, but may voluntarily do so from time to time. There were no advances received by the Partnership during the nine months ended September 30, 2014 and 2013. The Partnership may receive future advances of funds from the General Partner although the General Partner is not obligated to provide such advances. |
Note_5_Partnership_Income_Taxe
Note 5 - Partnership Income Taxes | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 5 - Partnership Income Taxes | ' |
Note 5 – Partnership Income Taxes | |
The Partnership was subject to a New Jersey tax based upon the number of resident and non-resident limited partners and apportionment of income related to the Partnership’s investment in certain Local Partnerships. During the year ended December 31, 2012, the Partnership paid approximately $66,000 as a required deposit for estimated 2012 New Jersey taxes, which was based on half of the previous year’s taxes. However, the Partnership’s estimate of the actual tax due for 2012 was approximately $12,000. The remaining balance paid of approximately $54,000 is reflected as other asset on the accompanying balance sheet at September 30, 2014 and 2013. As a result of the sale of Countryside during 2012(Note 2), the Partnership is no longer subject to paying New Jersey taxes. |
Note_6_Fair_Value_of_Financial
Note 6 - Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 6 - Fair Value of Financial Instruments | ' |
Note 6 – Fair Value of Financial Instruments | |
Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. At September 30, 2014, the Partnership believes that the carrying amount of other assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments. |
Note_7_Contingencies
Note 7 - Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 7 - Contingencies | ' |
Note 7 - Contingencies | |
The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership. |
Note_8_Subsequent_Event
Note 8 - Subsequent Event | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 8 - Subsequent Event | ' |
Note 8 - Subsequent Event | |
The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed. |
Note_1_Organization_and_Summar1
Note 1 - Organization and Summary of Significant Accounting Policies: Organization (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Organization | ' |
Organization | |
NTCI-II is a limited partnership formed under the California Revised Local Partnership Act as of January 12, 1990. The Partnership was formed to invest primarily in other limited partnerships (“Local Partnerships”) which own and operate multifamily housing complexes that are eligible for low income housing federal income tax credits (the “Housing Tax Credit”). The general partner of the Partnership is National Partnership Investments, LLC (the “General Partner” or “NAPICO”), a California limited liability company. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). The business of NTCI–II is conducted primarily by NAPICO. The Partnership shall continue in full force and effect until December 31, 2030, unless terminated earlier pursuant to the Partnership Agreement or law. | |
The General Partner has a one percent interest in the operating profits and losses of the Partnership. The limited partners will be allocated the remaining 99 percent interest in proportion to their respective investments. | |
Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the General Partner will be entitled to a property disposition fee as mentioned in the partnership agreement. The limited partners will have a priority item equal to their invested capital plus 6 percent priority return as defined in the partnership agreement. This property disposition fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions plus the 6 percent priority return. Disposition fees have not been paid or accrued. | |
At September 30, 2014 and December 31, 2013, the Partnership had outstanding 72,017 limited partnership interests. |
Note_1_Organization_and_Summar2
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States. |
Note_1_Organization_and_Summar3
Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investment in Local Partnerships (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Method of Accounting For Investment in Local Partnerships | ' |
Method of Accounting for Investment in Local Partnerships | |
The investments in Local Partnerships are accounted for on the equity method. Acquisition fees, selection fees and other costs related to the acquisition of the projects have been capitalized as part of the investment account and are being amortized by the straight line method over the estimated lives of the underlying assets, which is generally 30 years. |
Note_1_Organization_and_Summar4
Note 1 - Organization and Summary of Significant Accounting Policies: Mortgage Note Receivable (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Mortgage Note Receivable | ' |
Mortgage Note Receivable | |
The Partnership reviews its mortgage note receivable whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. During the quarter ended March 31, 2013 it was determined there was an impairment of $55,000 which reduced the mortgage note receivable to $3,478,000. This amount was recorded as Equity in losses of Local Limited Partnerships. The Partnership has recorded its mortgage note receivable at the impaired balance of $3,478,000 at September 30, 2014 and December 31, 2013. No further impairments were recognized during the nine months ended September 30, 2014 or 2013. See “Note 3 – Mortgage Note Receivable” for further information. |
Note_1_Organization_and_Summar5
Note 1 - Organization and Summary of Significant Accounting Policies: Impairment of Long-lived Assets (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Impairment of Long-lived Assets | ' |
Impairment of Long-Lived Assets | |
The Partnership reviews long-lived assets to determine if there has been any impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. An impairment loss was not recognized during the nine months ended September 30, 2014 and 2013. |
Note_1_Organization_and_Summar6
Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (Loss) Per Limited Partnership Interest (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Net Income (Loss) Per Limited Partnership Interest | ' |
Net Income (Loss) Per Limited Partnership Interest | |
Net income (loss) per limited partnership interest was computed by dividing the limited partners’ share of net income (loss) by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 72,017 and 72,032 for the three and nine months ended September 30, 2014 and 2013, respectively. |
Note_1_Organization_and_Summar7
Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Variable Interest Entities | ' |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At September 30, 2014 and December 31, 2013, the Partnership held variable interests in two VIEs for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partners conduct and manage the business of the Local Partnerships; | |
· the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties; | |
· the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships; | |
· the general partners are obligated to fund any recourse obligations of the Local Partnerships; | |
· the general partners are authorized to borrow funds on behalf of the Local Partnerships; and | |
· the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance. | |
The two VIEs at September 30, 2014 consist of Local Partnerships that are directly engaged in the ownership and management of two apartment properties with a total of 355 units. The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which was approximately $3,478,000 at September 30, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. |
Note_1_Organization_and_Summar8
Note 1 - Organization and Summary of Significant Accounting Policies: Revenue Recognition - Deposit Method (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Revenue Recognition - Deposit Method | ' |
Revenue Recognition – Deposit Method | |
Profit on the sale of limited partnership interests shall not be recognized under the full accrual method until all of the following criteria are met: a sale is consummated, the buyer’s initial and continuing investments are adequate, the seller’s receivable is not subject to future subordination and the risks of ownership have transferred to the buyer. The Partnership recognizes gains on sale of limited partnership interests using the deposit method when all of the criteria for the full accrual method are not met. Under the deposit method no gain is recognized, no receivable from the buyer is recorded at the closing date and any cash received from the buyer is reported as a deposit liability on the balance sheet. As a result, the Partnership continues to carry the investment on its financial statements. |
Note_2_Investments_in_and_Adva1
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
Tables/Schedules | ' | |||||||
Estimated condensed combined statements of operations for Local Partnerships | ' | |||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2014 | 2013 | 2014 | 2013 | |||||
Revenues: | ||||||||
Rental and other income | $ 751 | $ 736 | $ 2,222 | $ 2,123 | ||||
Expenses | ||||||||
Operating expenses | 513 | 423 | 1,541 | 1,268 | ||||
Interest | 149 | 142 | 449 | 428 | ||||
Depreciation and amortization | 136 | 132 | 409 | 395 | ||||
Total expenses | 798 | 697 | 2,399 | 2,091 | ||||
Loss from continuing operations | $ (47) | $ 39 | $ (177) | $ 32 |
Note_1_Organization_and_Summar9
Note 1 - Organization and Summary of Significant Accounting Policies: Organization (Details) | Sep. 30, 2014 | Dec. 31, 2013 |
Details | ' | ' |
Outstanding Limited Partnership Interests | 72,017 | 72,017 |
Recovered_Sheet1
Note 1 - Organization and Summary of Significant Accounting Policies: Impairment of Long-lived Assets (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Details | ' | ' |
Impairment Losses | $0 | $0 |
Recovered_Sheet2
Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (Loss) Per Limited Partnership Interest (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Details | ' | ' | ' | ' |
Number of limited partnership interests in EPS calculation during period | 72,017 | 72,032 | 72,017 | 72,032 |
Note_2_Investments_in_and_Adva2
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Details) (Partnership Interest, USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Partnership Interest | ' | ' | ' | ' |
Revenues | ' | ' | ' | ' |
Rental Income, Nonoperating | $751 | $736 | $2,222 | $2,123 |
Expenses | ' | ' | ' | ' |
Operating Costs and Expenses | 513 | 423 | 1,541 | 1,268 |
Interest Expense | 149 | 142 | 449 | 428 |
Depreciation, Depletion and Amortization, Nonproduction | 136 | 132 | 409 | 395 |
TotalExpenses | 798 | 697 | 2,399 | 2,091 |
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest | ($47) | $39 | ($177) | $32 |